Overview
Short selling is the sale of financial instruments that are not owned by the seller, or that the seller has borrowed. Sale on margin is a kind of short selling, but the concept of short selling is broader including sale of borrowed financial instruments other than margin trading.
| Selling |
Long selling |
Sale of securities that are owned by the seller |
| Short selling |
Short selling other than margin trading |
Sale of securities borrowed through negotiations or agreements with shareholders |
| Short selling on margin |
Sale of securities that the seller has borrowed from security companies. |
Marking requirements, price restrictions, short sales position reporting obligations are imposed to short selling orders according to Financial Instruments and Exchange Act and Order for Enforcement of the Financial Instruments and Exchange Act(hereinafter “FIEA Enforcement Order”).
| Responses pertaining to Comprehensive Revision to Short Selling Regulations |
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| FAQ on Comprehensive Revision to Short Selling Regulations |
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Marking requirements
Investors are required to clarify classification as long sales or short sales when placing sell orders. Brokers which received the orders are required to confirm the classification and to clarify the classification to the exchange.(FIEA Enforcement Order, Article 26-3)
Price Restrictions(Up-tick rule)
The price of short sale must be at a price above the last traded price of the security if that price was lower than the price in the previous trade, or at the last traded price if that price was higher than the price in the previous trade. (FIEA Enforcement Order, Article 26-4)
| Transition of price |
Explanation |
Orders accepted or not |
| JPY 100 -> JPY 101 |
The last traded price(JPY 101) was higher than the price in the previous trade(JPY 100). In this case, putting short sale order at lower than last traded price is prohibited. |
Short sale at JPY 102 -> OK
Short sale at JPY 101 -> OK
Short sale at JPY 100 -> NG |
| JPY 102 -> JPY 101 |
The last traded price(JPY 101) was lower than the price in the previous trade(JPY 102). In this case, putting short sale order at equal to or lower than last traded price is prohibited. |
Short sale at JPY 102 -> OK
Short sale at JPY 101 -> NG
Short sale at JPY 100 -> NG |
The price restrictions are not always applied. It becomes active once the traded price drops by 10 percent from the base price of each issue (trigger rule).
The following chart shows when the price restriction is applied. At the time the price drops by 10 percent from the base price of the day, the price restriction becomes active and it lasts until the end of the next trading day. Please note if the price drops by 10 percent for consecutive days, the price restriction is applied continuously.
| T |
T+1 |
T+2 |
| Not applied |
Applied |
Not applied |
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Dropped by 10% from the base price of the day(triggered) |
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The list of triggered issues is updated every business day on the following page.
Position reporting obligations
Investors are required to submit their short sale position to the brokers when their short positions exceed a threshold. The brokers are required to pass the short position reports to the exchange. (FIEA Enforcement Order, Article 26-5)
The detail of the rule is prescribed in Cabinet Office Ordinance on Restrictions on Securities Transactions, etc. (hereinafter ’Transaction Restriction Ordinance’). Investors are required to submit their short sale positions of each issue when the positions reach 0.2%. TSE aggregates the reports and discloses the information such as the short sale positions, the names of the investors etc. whose short sale positions reach 0.5%.
Exemption from short selling restrictions
Trading listed below is exempted from short selling restrictions according to Transaction Restriction Ordinance.
(Note) This list is just for reference to understand the outline of the regulation. Tokyo Stock Exchange, Inc., Japan Exchange Group, Inc., and/or Japan Exchange Regulation shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, or misunderstanding. Please check the ordinance and consult brokers or lawyers before trading.
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Exemption from marking requirements |
Exemption from price restrictions |
Exemption from position reporting obligations |
| When-issued transactions |
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✔
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✔
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| ETN（limited to securities issued by a foreign state or foreign person as trustee securities） |
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✔
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✔ |
| Short sale of securities which are going to be settled with ones the seller has bought |
✔
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✔
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✔
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| Short sale of securities which the seller has lent and are expected apparently to be returned before the settlement day |
✔
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✔
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✔
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| Off-auction trading (ToSTNeT trading) |
✔
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✔
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| Short sale of stocks after execution of CB, warrant, beneficiary securities, EB, share with put options or share subject to call within the amount of which the seller is going to obtain by the execution of the rights |
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✔
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| Short sale of stocks in case the corporate actions such as stock split, stock allocation, merger, company split, stock exchange or equity transfer are scheduled within the amount of which the seller is going to obtain through the corporate actions |
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✔ |
✔
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| Short sale of stocks within the amount of which the seller is going to obtain through offering |
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✔
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| Short sale of stocks which the seller has obtained by when-issued transactions |
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✔
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| Short sale of stocks which are in process of transfer, change of trading units, change of company name or replacement due to defacement etc. |
✔
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✔
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✔
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| Short sale on margin by individuals (up to 50 trading units) |
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✔
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✔
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| Short sale of stocks which the seller has agreed with a trading participant to trade the stocks at VWAP |
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✔
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| Short sale for arbitrage or hedge when the seller executes the rights of CB, warrant, beneficiary securities, EB or share with put options |
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| Short sale for arbitrage or hedge between the stocks and future |
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✔ |
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| Short sale for arbitrage or hedge between the stocks and single stock options |
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Short selling restrictions regarding public offering
FIEA Enforcement Order was revised in December 2011 and the short selling restrictions regarding public offering were implemented. (FIEA Enforcement Order, Article 26-6)
Under this article, investors are prohibited to cover short sales with stocks which they obtain through public offering if the short sales are conducted between the announcement of the offering and determination of the issue price.
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